Marketing in China Master Kong Tang Lok Yiu

Marketing in China Master Kong Tang Lok Yiu (Yoyo) 11340690109 Yu Wai Sum (Monica) 11340690110

Content Overview of Beverage industry and Nonalcohol business trend in the world What makes Master Kong’s consumer happy and loyal Consumer market Overview of Beverage industry and Nonalcohol business trend in the China What are the values Master Kong created for consumers? SWOT analysis Introduction of Master Kong Brand product Challenges in China Competitors Master Kong’s Business model Next Step in China

Overview of Beverage industry and Non-alcohol business trend in the world

Overview of Beverage industry and Non -alcohol business trend in the world • People’s living pace is faster • People are more stressful • Development of economy leads to a better living standard Ø People demand healthier functional drinks

Overview of Beverage industry and Non -alcohol business trend in the world • Functional drinks grow globally in a fast rate • Eg. Sport drinks, Energy drinks, calcium boost drinks, • Carbonated drinks market saturated Expected decline in carbonated products

Overview of Beverage industry and Non-alcohol business trend in China

Overview of Beverage industry and Non-alcohol business trend in China Major categories of beverages in China Carbonated Drinks Eg. Coca-Cola Tea Drinks Eg. Master Kong Ice Tea Fruit and Vegetable Juice Eg. Huiyuan Juice Bottled Water Eg. Nongfu Spring

Overview of beverage market and Non-alcohol business trend in China • Main Direction : Health drinks • “Eleventh Five-Year Plan” : focused on adjusting the beverage product structure, and reduced the proportion of carbonated beverages • Result ?

Overview of Beverage industry and Non-alcohol business trend in China • New categories of beverage entering the market (Functional drink) Eg. Sports drinks, energy drinks, vegetable protein drinks • China market : Continue to grow due to demographic changes

What is Master Kong?

Who I am? • • • Master Kong (Chinese : 康師傅) Taiwanese enterprise in China Founded in 1991 Headquarters in Tianjin, China Second most valued brand in China (TNS, 2011) (Logo of Master Kong)

Who I am? • Specialize in the production and distribution of : Instant Noodles Beverages Instant Food Products

Who I am? The Group is the market leader in instant noodles and readyto-drink (RTD) teas Instant Noodle Market Share In China 2012, By Sales Value Master Kong 28% 56% 16% Ready-to-drink Tea Market Share in China 2012, By Sales Value Uni-President China others Master Kong 32% 48% 20% Uni-president China Others

Master Kong’s Competitors

Competitors • Local Competitors • Uni-President - Together with Master Kong, the two brands’ market share in the first and second-tier cities are almost 80% - Uni-president’s fruit juice enjoyed a great popularity in the market

Competitors • Wong Lo Kat -The largest producer in the herbal tea industry. - Made from pure Chinese herbal medicine • Wahaha -The company produces more then 100 varieties of products including milk drinks, drinking water, carbonated drinks, fruit juice and tea.

Competitors • Multinational competitors • Coca Cola • Coca-Cola has enhanced its research in noncarbonates and built a research unit dedicated to traditional-Chinese-medicine drinks in China. • Nestle • Nestle continues to grow its business in China by investing in its portfolio of local and global brands.

Master Kong’s Business Model

Business Model • Vision Honest , Pragmatic, Innovative • Value Proposition To deliver delicious and safe food and beverages by an effective way • Target customer segments A wide range of customers

Business Model • Partner network A broad distribution and production network Offers flexibility on supply chain and pricing which enable Master Kong to respond to new products launch faster • Cost structure Cost : Raw materials, Advertising, plants, operations

Business Model • Distribution Channel : Value delivery network Direct sales; Indirect sales Past: Producer single Wholesaler/city Retailers Customers Recent: Producer Retailers Customers Postmen

Business Model • Distribution channel ~ 500 sales offices + 100 warehouses Serving > 5, 000 wholesalers + 73, 000 direct retailers Contributed to the company’s rapid penetration in the smaller cities and its lead in market share

Brands and Products

Brands and Products Marketing Mix (4 Ps) • Product • family branding Line of products are sold with the same brand name - Products gains recognition easily - One product can affect the overall brand • Product life cycle - Master Kong beverages have existed in the market for a long time – but still growth phase - Innovative – understand consumer needs and introduce new flavors

Brands and Products Marketing Mix (4 Ps) • Product Mix Products Beverages Line depth refers to the number of subcategories a category has Instant food RTD Teas Water Juice Carbanated Drinks Iced red tea Mineral water Daily C Pepsi soft drinks Green tea Natural water Apple juice Flower tea Pineapple juice Oolong tea Gaujava juice Mango juice width of product mix Instant noodles Cookies Muffins Puff length of product line

Brands and Products Marketing Mix (4 Ps) • Price • Neutral Pricing - The prices are set by the general market, with the prices just at competitors’ prices. Yihaodian. com

Brands and Products Marketing Mix (4 Ps) • • - Promotion Advertising Invite celebrities to be spokesperson Design Special characters to attract attention Penguins ( an image of cool )

Brands and Products Marketing Mix (4 Ps) • Promotions • Public relations – Charity works, sponsorships and events

Brands and Products Marketing Mix (4 Ps) • Promotion • Sales promotion – free gifts, lucky draws, discounts

Brands and Products Marketing Mix (4 Ps) • Place • Intensive distribution - convenient for consumers to access • Extensive distribution networks in first-tier cities (Beijing, Guangzhou, Shanghai and Shenzen).

What are the values Master Kong created for consumers?

What value does Master Kong create for customers? • Innovative products • The leading innovator in the industry in terms of flavors, techniques and operational concepts. • Transform the industry's "Made in China" image to be "Created in China". E. g. Introduced the classic braised beef noodles to the market in the early 1990 s. The flavor has long been a favorite with Chinese people.

What value does Master Kong create for customers? • • • Quality drinks Ready-to-drink (RTD) Tea Barley-flavored tea Healthy ingredients, natural and unconventional taste The release became an instant success.

What value does Master Kong create for customers? • • • - Unique lifestyle Tea drinking – Traditional Chinese culture Ready-to-drink tea skip the brewing process Healthy, yet more convenience Adapt the traditional tea culture to modern lifestyle Popular among new generation

How does Master Kong make its customers loyal and happy

How does Master Kong make customer HAPPY and LOYAL? • Special customer experience • Master Kong Iced Red Tea : - Young , Modern, Energetic image - Target customer : young generation - More open to new ideas • Master Kong Iced Red Tea has an official website • http: //www. myicetea. com. cn/ • Interact with young customer

How does Master Kong make customer HAPPY and LOYAL? • QR code , Funny Video, Fan meeting with stars • Not only a ordinary drink – More fun

Master Kong’s Consumer Market

Master Kong’s consumer market • Master Kong’s Beverages : • Serve a wide consumer base spread across geographies • Young adults and health conscious consumers are targeted (16 -35 year-old)

Master Kong’s consumer market • Characteristics affecting consumer behavior • Culture • Rising consumer awareness about the health hazards of carbonated drinks - A shift towards RTD tea and juice. • Surge in the health conscious population (E. g. Women )who prefer antioxidant property of RTD tea

Master Kong’s consumer market • • Characteristics affecting consumer behavior Economy Increase in disposable income in China Trigger the growth rate of RTD tea and Juice market

Master Kong’s consumer market • Characteristics affecting consumer behavior - Product - Price - Package - Flavors

SWOT Analysis

SWOT overview STRENGTHS -Innovative -Broad Production and Distribution network -Long history and Good reputation -Massive advertising and promotional campaign -Large market share OPPORTUNITIES - Support from government policy - Advanced technology - Rising purchasing power of consumers -Huge potential market WEAKNESSES - Damaged brand image - Lower penetration in rural and lower tier cities THREATS -Fierce competition -Consumer’s taste is changing quickly -Cost of raw materials is rising

SWOT analysis Strengths • Innovative - The “New Taste for Traditional Drink” series were well-received by consumers. • Broad Production and Distribution network - More accessible to consumers, larger flexibility • Long history and Good reputation • Massive advertising and promotional campaign • Large market share

SWOT analysis • • • Weakness Damaged brand image The Master Kong’s mineralized water incident Internet rumors Lower penetration in rural and lower tier cities

SWOT analysis Opportunities - Support from government policy - Advanced technology : reduce cost - Rising purchasing power of consumers - Huge potential market : rural area, bottled water market

SWOT analysis Threats -Keen competition : similar products -Consumer’s taste is changing quickly -Cost of raw materials is rising

Challenges in China

Challenges in China • Facing the fierce competition in China, how can Master Kong maintain or increase it’s market share? • How can Master Kong maintain their profit growth in the saturating market in first-tier cities?

Next step in China

Next step in China • Kong-Pep partnership -Purchase Pepsi Cola’s mainland business - Form a “strategic alliance” to beat competitor, Coca-Cola. -Both companies expand their soft drinks markets -Build a more diversified product profile

Next step in China • Expand it’s distribution network into the rural market • The richest cities are nearing saturation • Expand to rural market - next wave of growth. • Current network : costly and inefficient to distribute products to the hard-to-reach rural outlets